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BHP increases stake in copper explorer SolGold![](https://www.copyright link/content/dam/images/h/1/5/i/n/s/image.related.afrArticleLead.620x350.h16oj4.png/1539667309463.jpg)
BHP CEO Andrew Mackenzie... BHP will spend $82.9m increasing its stake in copper explorer Solgold. AAPIMAGE
by
Peter KerBHP will spend ÂŁ45 million ($82.9 million) increasing its stake in copper explorer SolGold, under a private placement that increases the
chances of a bidding war with rival miner Newcrest Mining.
BHP will own 11.2 per cent of SolGold after completion of the private placement with the junior explorer this week, in a move that highlight's the mining sector's growing enthusiasm toward Ecuadorian copper acreage.
BHP currently owns about 6 per cent of Solgold, and will pay 45 pence (82.9¢
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for each extra SolGold share; more than double the 20.5 pence that SolGold's London-listed shares were fetching just 43 days ago on September 3.
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SolGold shares have surged
since September 5, when BHP agreed to pay ÂŁ27.4 million ($49 million) for about 103 million SolGold shares; a transaction that valued SolGold shares at 26.6 pence.
Solgold shares last traded at 35.2 pence (64.8¢
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Last updated: Wed Oct 17 2018 - 11:53:17
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By the end of this week BHP will be the third biggest shareholder in SolGold, behind Newcrest which has 14.5 per cent and
ASX listed minnow DGR, which has about 12 per cent.Solgold has found
encouraging copper and gold grades at its Cascabel tenement in northern Ecuador, and it has duly caught the attention of many of the world's top miners who hope Ecuador can become a major copper producer like its southern neighbours Chile and Peru.
Newcrest and BHP first revealed their interest in SolGold in October 2016, but the explorer opted to accept Newcrest's offer of buying ten per cent of its shares, partly because SolGold management believed Newcrest's experience in block caving made them the ideal partner for the particular type of geology present in Ecuador.
Many of the world's biggest miners have since flocked to Ecuador to explore for copper, including Chilean copper giant CODELCO and Fortescue Metals Group.
The Australian Financial Review revealed in September that
Gina Rinehart's flagship company Hancock Prospecting had secured enough acreage in Ecuador to have SolGold's Cascabel tenement surrounded on three sides, suggesting it could yet be a player in the battle for SolGold.
But a bidding war for the company may take time to emerge, if it is to occur at all; Tuesday's transaction with BHP includes a clause that prevents the mining giant from buying further SolGold shares for a period of two years, unless the SolGold board provides consent.
BHP has also agreed to support SolGold capital raisings and change of control transactions, so long as 60 per cent of SolGold shareholders are in favour.
BHP has stakes in copper mines in Chile and Peru, and the company's Minerals America boss Danny Malchuk said SolGold could be part of replenishing its copper portfolio.
"Ecuador is a highly prospective region for the next generation of copper supply. This additional investment in SolGold strengthens our strategic position in the Cascabel copper exploration project," he said in a statement.
RBC analyst Paul Hissey said BHP had "clearly ramped-up its willingness to pursue this project" and had greater financial firepower than Newcrest.
"While we believe there is clearly a mismatch in the ability to pay up between BHP and Newcrest, we firmly believe Newcrest has some genuine technical skills, which don't appear obvious within the BHP portfolio," he said, in a reference to
Newcrest's experience with block caving and panel caving at Cadia in New South Wales."The other concern for the market will likely be what the 'right price' is for an emerging project, which has not yet confirmed the full extent of the mineralisation.
"This remains a long dated project, with drilling, evaluation and approvals likely to provide benefits to future generations of management at both BHP and Newcrest."
Copper was fetching $US2.86 per pound on Tuesday morning.
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